Question 1

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

Accepted Answer

A)  perfectly inelastic. 
B)  inelastic but not perfectly inelastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
E)  unit elastic. 
A)  perfectly inelastic. 
B)  inelastic but not perfectly inelastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
E)  unit elastic.

Question 2

A firm that is a price taker faces

Accepted Answer

A)  an elastic supply curve. 
B)  an inelastic supply curve. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curve. 
E)  an elastic but not perfectly elastic demand curve. 
A)  an elastic supply curve. 
B)  an inelastic supply curve. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curve. 
E)  an elastic but not perfectly elastic demand curve.

Question 3

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

Accepted Answer

A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost. 
A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost.

Question 4

To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

Accepted Answer

A)  0; incurs an economic loss of less than $20 
B)  between 3 to 5 cans; earns a normal profit 
C)  10; earns an economic profit of $2.90 
D)  10; earns an economic profit of $29 
E)  more than 10; earns an economic profit 
A)  0; incurs an economic loss of less than $20 
B)  between 3 to 5 cans; earns a normal profit 
C)  10; earns an economic profit of $2.90 
D)  10; earns an economic profit of $29 
E)  more than 10; earns an economic profit

Question 5

The U-pick berry market is perfectly competitive.Suppose that all U-pick blueberry farms have the same cost curves and all are making an economic profit.What happens as time passes? What is the long-run equilibrium outcome?

Accepted Answer

The presence of economic profit attracts

Question 6

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms ________ and the market ________.

Accepted Answer

A)  enter; demand curve shifts leftward 
B)  enter; supply curve shifts rightward 
C)  exit; demand curve shifts leftward 
D)  exit; supply curve shifts rightward 
E)  exit; supply curve shifts leftward 
A)  enter; demand curve shifts leftward 
B)  enter; supply curve shifts rightward 
C)  exit; demand curve shifts leftward 
D)  exit; supply curve shifts rightward 
E)  exit; supply curve shifts leftward

Question 7

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

Accepted Answer

A)  fewer firms in the market. 
B)  more firms in the market. 
C)  the same number of firms in the market. 
D)  probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E)  a permanent decrease in supply. 
A)  fewer firms in the market. 
B)  more firms in the market. 
C)  the same number of firms in the market. 
D)  probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E)  a permanent decrease in supply.

Question 8

If new firms enter a perfectly competitive industry,the market supply

Accepted Answer

A)  does not change. 
B)  becomes more price elastic. 
C)  becomes more price inelastic. 
D)  increases. 
E)  decreases because each firm produces less than before the entry. 
A)  does not change. 
B)  becomes more price elastic. 
C)  becomes more price inelastic. 
D)  increases. 
E)  decreases because each firm produces less than before the entry.

Question 9

If a perfectly competitive firm is maximizing its profit and is making an economic profit,which of the following is correct?
i.Price equals marginal revenue.
ii.Marginal revenue equals marginal cost.
iii.Price is greater than average total cost.

Accepted Answer

A)  i only 
B)  i and ii only 
C)  ii and iii only 
D)  i and iii only 
E)  i, ii, and iii 
A)  i only 
B)  i and ii only 
C)  ii and iii only 
D)  i and iii only 
E)  i, ii, and iii

Question 10

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  become vertical. 
E)  become the same as the individual producers' supplies. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  become vertical. 
E)  become the same as the individual producers' supplies.

Question 11

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

Accepted Answer

A)  decrease his output of rutabagas. 
B)  not change his output of rutabagas because Rudy's firm is a price taker. 
C)  increase his output of rutabagas. 
D)  at first decrease and then increase his output of rutabagas. 
E)  probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas. 
A)  decrease his output of rutabagas. 
B)  not change his output of rutabagas because Rudy's firm is a price taker. 
C)  increase his output of rutabagas. 
D)  at first decrease and then increase his output of rutabagas. 
E)  probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas.

Question 12

In which market structure do firms exist in very large numbers,each firm produces an identical product,and there is freedom of entry and exit?

Accepted Answer

A)  monopoly 
B)  oligopoly 
C)  only perfect competition 
D)  only monopolistic competition 
E)  both perfect competition and monopolistic competition 
A)  monopoly 
B)  oligopoly 
C)  only perfect competition 
D)  only monopolistic competition 
E)  both perfect competition and monopolistic competition

Question 13

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

Accepted Answer

A)  600,000 units. 
B)  60,000,000,000 units. 
C)  60,000 units. 
D)  60 units. 
E)  10,000 units. 
A)  600,000 units. 
B)  60,000,000,000 units. 
C)  60,000 units. 
D)  60 units. 
E)  10,000 units.

Question 14

To maximize its profit,in the short run a perfectly competitive firm decides

Accepted Answer

A)  what price to charge for its product. 
B)  what quantity of output to produce. 
C)  whether to exit the market. 
D)  whether to increase the size of its plant. 
E)  how much advertising it should undertake. 
A)  what price to charge for its product. 
B)  what quantity of output to produce. 
C)  whether to exit the market. 
D)  whether to increase the size of its plant. 
E)  how much advertising it should undertake.

Question 15

The market supply in the short run for the perfectly competitive industry is

Accepted Answer

A)  the same as each producer's supply. 
B)  the sum of the supply schedules of all firms. 
C)  divided up according to each firm's selling price. 
D)  set at the maximum price a buyer will pay for one unit. 
E)  equal to the average of each firm's supply schedule. 
A)  the same as each producer's supply. 
B)  the sum of the supply schedules of all firms. 
C)  divided up according to each firm's selling price. 
D)  set at the maximum price a buyer will pay for one unit. 
E)  equal to the average of each firm's supply schedule.

Question 16

For a perfectly competitive firm,the market price of a good is

Accepted Answer

A)  a given which the firm cannot change. 
B)  determined by the firm in order to maximize its profit. 
C)  equal to the firm's marginal revenue. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct. 
A)  a given which the firm cannot change. 
B)  determined by the firm in order to maximize its profit. 
C)  equal to the firm's marginal revenue. 
D)  Answers A and B are correct. 
E)  Answers A and C are correct.

Question 17

What is the relationship between the price,P,and the average total cost,ATC,for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

Accepted Answer

If the price is greater than the average

Question 18

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

Accepted Answer

A)  $0 because Bill shuts down. 
B)  more than $0 and less than $1,200 per week. 
C)  more than $1,200 and less than $1,400 per week. 
D)  more than $1,400 per week and less than $1,800 per week. 
E)  more than $1,800 per week. 
A)  $0 because Bill shuts down. 
B)  more than $0 and less than $1,200 per week. 
C)  more than $1,200 and less than $1,400 per week. 
D)  more than $1,400 per week and less than $1,800 per week. 
E)  more than $1,800 per week.

Question 19

A firm in perfect competition is a price taker because

Accepted Answer

A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  its demand curve is vertical at the profit-maximizing quantity. 
A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  its demand curve is vertical at the profit-maximizing quantity.

Question 20

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Accepted Answer

A)  revenue exceeds total cost by the largest amount. 
B)  revenue exceeds total cost by the smallest amount. 
C)  revenue is maximized. 
D)  cost is minimized. 
E)  revenue equals total cost. 
A)  revenue exceeds total cost by the largest amount. 
B)  revenue exceeds total cost by the smallest amount. 
C)  revenue is maximized. 
D)  cost is minimized. 
E)  revenue equals total cost.

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

A firm that is a price taker faces

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

To maximize its profit,the firm in the figure above produces cans per day and .

The U-pick berry market is perfectly competitive.Suppose that all U-pick blueberry farms have the same cost curves and all are making an economic profit.What happens as time passes? What is the long-run equilibrium outcome?

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms and the market .

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

If new firms enter a perfectly competitive industry,the market supply

If a perfectly competitive firm is maximizing its profit and is making an economic profit,which of the following is correct? i.Price equals marginal revenue. ii.Marginal revenue equals marginal cost. iii.Price is greater than average total cost.

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

In which market structure do firms exist in very large numbers,each firm produces an identical product,and there is freedom of entry and exit?

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

To maximize its profit,in the short run a perfectly competitive firm decides

The market supply in the short run for the perfectly competitive industry is

For a perfectly competitive firm,the market price of a good is

What is the relationship between the price,P,and the average total cost,ATC,for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

A firm in perfect competition is a price taker because

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Perfect Competition

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

A firm that is a price taker faces

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

The U-pick berry market is perfectly competitive.Suppose that all U-pick blueberry farms have the same cost curves and all are making an economic profit.What happens as time passes? What is the long-run equilibrium outcome?

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms ________ and the market ________.

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

If new firms enter a perfectly competitive industry,the market supply

If a perfectly competitive firm is maximizing its profit and is making an economic profit,which of the following is correct? i.Price equals marginal revenue. ii.Marginal revenue equals marginal cost. iii.Price is greater than average total cost.

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

In which market structure do firms exist in very large numbers,each firm produces an identical product,and there is freedom of entry and exit?

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

To maximize its profit,in the short run a perfectly competitive firm decides

The market supply in the short run for the perfectly competitive industry is

For a perfectly competitive firm,the market price of a good is

What is the relationship between the price,P,and the average total cost,ATC,for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

A firm in perfect competition is a price taker because

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

To maximize its profit,the firm in the figure above produces cans per day and .

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms and the market .